With Hardware Sales Sluggish, Oracle Unveils Server Speed Show

March 27, 2013 – Oracle Corp. is introducing two computer systems based on chip designs acquired from Sun Microsystems as it aims to win market share from IBM and reverse a slide in hardware sales.

The servers – one a set of mid-range computers using a chip called the T5 and the other a high-end system using the more powerful M5 chip – were unveiled at an event Tuesday evening at Oracle’s headquarters in Redwood City, Calif.

Oracle, the largest maker of database software, needs to bolster its computer sales and retain customers as hardware revenue -- including servers and storage gained in the 2010 acquisition of Sun -- declined 23 percent to $671 million in the fiscal third quarter, which ended in February. The company is targeting markets including telecommunications, banking and manufacturing, competing against comparable products from IBM. In a telecom move earlier in the week, Oracle announced the acquisition of network signaling and communications data control provider Tekelec.

“When Oracle bought Sun, a lot of people said ‘Sparc is a real laggard,’” Larry Ellison, Oracle’s chief executive officer, said at the event, referring to chips developed by Sun. “The big question is, when playing catch-up, that’s got to be easier. Can you keep it up, can you keep going? And the answer is, we think we can.”

Oracle’s Sparc computers, which run the Solaris operating system, and IBM’s Power servers, which run its own version of the Unix operating system, compete in a shrinking market. Global sales of Unix systems declined 26 percent to $2.03 billion in the fourth quarter, according to researcher Gartner Inc. IBM has 63 percent of the market, compared with 17 percent each for Oracle and Hewlett-Packard Co.

“We are continuing to model a decline in the Sun business, with all the growth coming from the Exa-series” of data processing and analysis systems that use chips from Intel Corp., Rick Sherlund, an analyst at Nomura Holdings Inc., said in a March 25 research note.

Sales of the Sparc-based T-Series computers Oracle updated yesterday grew in the single digits in the third quarter, while the more powerful M-Series “showed a sharp fall-off” as customers held off purchases before the arrival of the M5 chip, said Sherlund, who has a buy rating on Oracle shares.

The entry-level price for an Oracle T5 system will be less than $500,000 for a configuration capable of housing eight chips, Oracle said. The company is planning to build the ability to accelerate its databases and Java software into its chips, as customers move data from slower disk drives to faster silicon memory.